Following the Conservative party conference speech by Sajid Javid, the Department for Communities and Local Communities has launched a consultation requesting views on whether a new regulatory model is needed for agents in the leasehold sector. Specifically, the call for evidence states “we want to understand what form regulation of letting and managing agents should take to best protect and empower tenants and leaseholders”.

The Consultation

The origins of this consultation appears to be the regulation of lettings agents including the ban of fees and this consultation makes extensive reference to both letting agents and the fee ban. For the purposes of this post we will only concentrate on leasehold, leaseholders and managing agents. A second post will follow.

Problems identified by the government

The Competition and Markets Authority have estimated that service charges alone could total between £2.5 and £3.5 billion a year. However, despite paying these large sums of money, leaseholders often have little say in the selection of agents in receipt of these service charges. Furthermore, some argue that a lack of transparency leads to unfair fees and costs that go unnoticed with little or no opportunity to switch agents when leaseholders are unhappy.

The government acknowledges that these problems could be due to the lack of minimum standards and untrained and inexperienced agents. In fact, a survey conducted by the Leasehold Advisory Service and others found that 66% of leaseholders disagreed with the statement that the overall service provided by their managing agent was good. Furthermore, 40% of leaseholders disagree with the statement that service charges represent value for money. It is also understood that the various agent redress schemes, the Property Ombudsman, Ombudsman Service: Property and the Property Redress Scheme received over 20,000 enquiries with 5,000 complaints actually made against managing agents. Ultimately the problem appears to be leaseholders’ frustration with the lack of power they have to challenge poor services.

Possible Solutions

Therefore, in response to all the issues identified, the government is now seeking views on the minimum entry requirements and standards that property agents should follow and whether a mandatory code of practise is necessary. The views are sought by responding to a number of questions on or before 29th November 2017. A copy of the consultation paper can be found here.

Comment

Once the consultation closes the government is expected to bring forward detailed proposals early next year. Given the ban on lettings agents fees it is expected that some of the proposals if not all will also be implemented. However, at the moment with Brexit we cannot advise on a likely timeframe.